A lot has changed in a year. Samsung sold 20 million Galaxy S III devices this summer, while Google recently announced that more than 1.3 million Android devices are activated each day — and that it would soon reach the milestone of 0.5 billion Android users. The San José court’s recent decision to fine Samsung $1 billion for copying Apple raised a number of complex questions regarding what exactly innovation means in the smartphone era. While it badly affected Samsung’s brand image, Samsung has a larger portfolio of mobile devices and has also proved it was able to innovate with the Note.

Even more so than a year ago, Apple’s product strategists face an ongoing paradox: maintaining premium leadership with an annual product renewal while tapping the rapidly “mainstreaming” global smartphone market. Consequently, expectations were extremely high — often irrationally so — that Apple would once again truly innovate with hardware design and features.

This is why many will describe the newly announced iPhone 5 as only an incremental improvement. Competitors will try to convey the message that the device is only playing catch-up when it comes to LTE compatibility or imaging capacity. While this is true in the US’s more advanced LTE market, Apple will offer five different frequency bands that will enable it to support the various initiatives of the different European mobile operators, including Everything Everywhere and T-Mobile in the UK. Unlike most new smartphones, the iPhone 5 is not NFC-compliant. Forrester stated recently that while the NFC ecosystem is maturing and opening up new opportunities beyond contactless payments, it is still early days for the technology. Apple seems to believe that neither the technology nor the market is ready yet. More specifically, this means that Apple hasn’t yet managed to put in place the experience that it would like to provide via NFC. One of the consequences is that Apple’s Passbook is, for now, wholly focused on digital, with no link to the physical world. I expect Apple to first put in place an ecosystem of partners so that Passbook can aggregate your loyalty cards, ticket information, coupons, and other information in one place for easy access; this will, by default, be promoted on the iPhone 5’s home screen. Once this ecosystem has matured and Apple believes that NFC (combined with other technologies) can offer a differentiated consumer experience, it is likely that Apple will introduce NFC across its entire device range. For now, Apple is betting on Bluetooth 4.0 with low energy (BLE), which is enabling data-only transfers between sensors but is not a direct alternative to NFC.

Does it really matter if the iPhone 5 doesn’t meet the high expectations for hardware technology features? Not really. Why?

1. This is not about the technology per se but about a player’s ability to differentiate the overall consumer experience. This ability no longer comes from the hardware itself; it is all about “the larger ecosystems that smartphones inhabit,” as my colleague Charles Golvin puts it. He sums up the situation thus: The iPhone 5 strengthens Apple’s leadership in the larger competition among ecosystems. In this regard, Apple is still in the best position to offer a seamlessly integrated experience across devices, thanks to the deeper Facebook integration, the augmented mapping experiences, the Passbook’s ecosystem, and the other services that the iOS6 and iCloud ecosystems enable.

2. From a pure product and design feature perspective, the new version looks much better; the phone is markedly thinner and lighter and contains a lot of innovation and impressive engineering, all of which is worthy of praise. In addition, Apple now has an iPhone product portfolio that spans all price points (including the 8 GB iPhone 4 for free) for all major carriers — with the notable exception of China Mobile, as Apple still doesn’t support the local TD-SCDMA norm.

I want to upgrade from 4 (not 4S) to 5 but the 4G compatibility is not flexible for Europe by any stretch. Upgrading to another variant of the iPhone 5 to suit a new 4G implementation 6 months later at a premium would be madness.

I also agree on the 'missing NFC' and its importance as a mechanism to connect mobile with the physical world - what a missed opp for Passbook integration !

Finally, I wonder whether they should have held back iOS6 details and revealed along with the iPhone 5 as it would have made for a chunkier more exciting launch bullet list.

Anthony

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